I was a teenager when Congress created the Individual Retirement Account, and as soon as I had my first summer job, my father advised me to open an IRA. You can imagine my reaction; I didn’t yet have a full-time job, and my father was talking about retirement! However, my father managed to persuade me by teaching me the Rule of 72 (72 ÷interest rate = number of years in which an investment will double). At a time of double-digit interest rates, I imagined I would retire with more than enough in savings if I continued to maximize my IRA contributions.
Circumstances changed. Interest rates fell; they’ve been below 10% for almost 30 years and hovering slightly above zero since 2009. In addition, the annual maximum IRA contribution did not keep up with inflation (in the first 25 years of the IRA’s existence, the maximum contribution was increased only once, in 1982, from $1,500 to $2,000). Yet, despite my increasing reliance on employer-sponsored retirement plans to help me meet my retirement goals, investing in my IRAs has remained an integral part of my retirement planning, particularly now that I have added a Roth IRA to the mix.